The phenotypic plasticity of mature vascular smooth muscle cells (VSMC) facilitates angiogenesis and wound healing, but the ability to dedifferentiate also contributes to vascular pathologies including atherosclerosis and intimal hyperplasia. IGF-I is unique among growth factors in promoting VSMC differentiation, with this effect attributed to its preferential activation of PI 3-Kinase (PI 3-K) and Akt. We have previously reported that rapamycin promotes VSMC differentiation by inhibiting the mTOR target S6K1. Here, we show that rapamycin activates Akt and induces contractile protein expression in human and bovine VSMC in a serum- and IGF-I-dependent manner, by relieving S6K1-dependent negative regulation of IRS-1. In skeletal muscle and adipocytes, rapamycin relieves mTOR/S6K1-dependent inhibitory phosphorylation of IRS-1, thus preventing IRS-1 degradation and enhancing PI 3-K activation. We report that this mechanism is functional in VSMC and crucial for rapamycin-induced differentiation. Rapamycin inhibits S6K1-dependent IRS-1 serine phosphorylation, increases IRS-1 protein levels, and promotes association of tyrosine-phosphorylated IRS-1 with PI 3-K. A rapamycin-resistant S6K1 mutant prevents rapamycin-induced IRS-1/Akt activation and VSMC differentiation. Notably, we report that rapamycin-mediated feedback signaling selectively activates only the Akt2 isoform and that Akt2, but not Akt1, is sufficient to induce contractile protein expression. Akt2 is required for rapamycin-induced VSMC differentiation, while Akt1 signaling appears to oppose contractile protein expression. Rapamycin’s anti-restenotic effect in patients may be attributable to this unique pattern of PI 3-Kinase effector regulation wherein anti-differentiation signals from S6K1 are inhibited, but pro-differentiation Akt2 activity is promoted through an IRS-1 feedback signaling mechanism.